Coworking Growth Very Strong in 2017

Amanda Schneider, researcher, consultant, and founder of Contract Consulting Group writes about how in 2017, the flexible office industry, primarily coworking, is seeing continued growth. Amanda correctly points out that by researching the places we pay to work we learn much about the future of workspace.

3 Areas of Coworking Focus

1.Private Businesses and Landlords are getting into the flexible workspace game.

This year we’re seeing flexible options from landlords and private businesses grow faster than anyone expected. According to a recent Liquidspace report, 36% of the transactions on their platform are through private businesses or landlords offering extra space directly to consumers. Jamie Russo, Executive Director of the GWA, says, “The Commercial Real Estate industry may not have historically described itself as ‘nimble and innovative,’ but that may just be the behavior that we’re starting to see. This growth in transactions from landlords suggests demand for coworking, particularly from corporations, is growing. Landlords are increasingly seeking creative relationships with shared workspace operators in order to effectively activate their flexible offerings.”

The predominant approach is still the operator leasing the space, with 72% of respondents following that model. 19% of the respondents own their space, 3% reported a joint venture between the operator and the landlord, and 1% reported a management contract between the operator and the building owner. GWA research anticipates seeing less leasing and more operator/owner relationships in the next five years. As rent rates increase, the typical model is facing new challenges to remain profitable.

Russo continues, “Growth of flexible office space offered by landlords will be an interesting evolution to watch over the next few years. I predict we will see an increased focus on the level of hospitality and community activation across flexible offerings, particularly in the context of a landlord offering a diverse portfolio of spaces. As corporations look to increase employee productivity with tools like flexibility, reduced commutes and compelling work environments, landlords will look to market their buildings by meeting that criteria and offering a variety of amenities, workspace configurations and managed communities to keep users engaged. Landlords may choose to partner with experienced coworking operators to deliver on hospitality and community activation.

2.There is an increasing focus on the user experience.

Two of the hottest buzzwords in the workspace industry right now are “consumerization” and “user-centered.” Everyone from landlords to corporate real estate departments to temperature control start-ups are focused on serving the “HDTV” consumer that expects a high level of design and hospitality at the corporate office, what we in the industry call their “third space.” Russo says, “What we are seeing is real estate evolving to be thought of not just as ‘buildings’ but as organic ecosystems that flex as their users’ needs change. As corporations start to look at off-campus options for employees, we see landlords pulling out all stops to attract users and taking really innovative approaches to amenities, workspace options and services.”

Highlights from the first half of 2017 that illustrate the user-focused industry trends:

· Tishman and Speyer launches “Zo,” a high-amenity concept that aims to make its portfolio highly desirable and competitive.

· Banks—some of the most conservative, slow-moving, security-fearing companies—are using flexible office options as they grow teams in ancillary markets.

· Investments continue to flow into the coworking sector, indicating a bullish outlook for the continued growth of the consumerization of workspace: The Wing raises $8M, The Yard raises $15M in debt financing, WeWork added $300M to its balance sheet from Softbank, Industrious raised another $25M, and Asian companies added a long list of funded shared workspaces.

3.Open plan ≠ Coworking. Users are looking for productivity, not just a place to network.

Today 80% of coworking spaces offer private offices. While private spaces for individuals or teams make startup-costs higher for the operator, the demand seems to be growing for them.

Russo explains, “There is a big myth that coworking means open workspace. When the industry started to emerge in 2006, layouts were primarily open space and the hosts were focused around the simple idea of bringing people together to work. That approach worked for a period of time, but today the makeup of users and their space requirements is evolving.”

No longer are programmers and freelance designers the core membership. The GWA data shows that makeup of audiences today is 20% freelancers, 47% small business, and 12% mobile corporate users.

In many markets, the demand is higher for offices and team spaces, making them easier to fill. While some coworking purists idealize the open-plan for its community-building simplicity, this often comes without practical consideration for the type of work that gets done in shared workspaces. Russo says, “We see people saying they want a professional experience and a variety of usable spaces. The data suggest the market is starting to supply that in increasingly creative ways. People are expecting well-designed spaces that are also professional, and they are willing to pay for an experience that they can’t get from a home office or even a corporate campus. This is the consumerization of the work place.”

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